Friday, 18 February 2022




Elements Of The Law Of Commercial Transactions

In the 20th century, domestic as well as international commerce experienced an expansion far beyond any earlier dimensions. With the multiplication of commercial transactions, the demand for legal certainty increased, especially for transactions across national boundaries.

Contractual relations

The first response to the multitude of practically identical transactions was the standardization of contracts. Printed standard contracts or forms laid down those provisions that are essential in the eyes of the drafting party. It depended upon the relative economic strength of the other party whether departures from the printed form could be negotiated. Trade associations as well as individual enterprises developed and elaborated forms and standard contracts for their members.

The same technique of standardization was adopted for international transactions. The forms and standard contracts of certain well-known trade associations, especially British ones, such as the London Corn Trade Association, were used by exporters and importers in many countries. The same was true of many shipping transactions. Even international bodies, such as the United Nations Economic Commission for Europe, elaborated printed forms for certain international contracts. Apart from standardizing the contract practices of a particular party, these uniform conditions also helped to bridge the gap between the many different national rules. They were a means of achieving partial uniformity of law for international trade.

Sale of goods

The sale is the most common commercial transaction. All the rights that the seller has in a specific object are transferred to the buyer in return for the latter’s paying the purchase price to the seller. The objects that may thus be transferred may be movable or immovable and tangible or intangible. (Patents are an example of intangibles.)

Not all transfers of goods to another person for any purpose whatsoever constitute a sale. Goods may be transferred for use only (lease), for safekeeping or storage (bailment), as a present (gift), or in exchange for another good (barter). They may also be transferred as security. A sale is involved only if the seller intends to part with the object completely and conceivably forever and to receive instead a sum of money as the price.

The seller’s complete parting with all his rights in the object sold means, in legal parlance, transfer of ownership to the buyer. One may say that the transfer of ownership for a price is the essence of a sale.

Although it would appear to be logical that a buyer cannot become the full owner unless the seller had unrestricted ownership, the demands of commercial expediency have carved out important exceptions in favour of a purchaser in good faith. Details vary considerably from country to country. At least between merchants, the acquisition of goods from one in possession of them who can in good conscience be regarded by the other as their owner, or at least as being entitled to their disposition, usually confers ownership on the buyer, even if the seller was not in fact the owner.

The sanctions available to the buyer who does not obtain unrestricted ownership vary from country to country. Some countries impose upon the seller the outright obligation to procure ownership in the goods sold to the buyer. A violation of this duty is a breach of contract and opens the same remedies as those for nondelivery, including a suit for transfer of ownership. But in most countries the seller’s obligation is limited to warranting “quiet possession”—that is, guaranteeing enjoyment of the goods undisturbed by claims of third parties. In some countries the warranty of quiet possession entitles the buyer who is sued by a third party to call the seller into the proceedings or even to turn the proceedings over to the seller so that the latter may defend the action. Everywhere the buyer may claim damages from the seller, covering not only the difference between the contract and the market price of the goods but also the expenses of defense against the claims of the third party. The buyer’s rights are usually excluded if he knew of the seller’s defective title at the time of contracting or if he became aware of it at some later time but nevertheless accepted the goods.

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